Products from developing countries, coming to a store near you...

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Products from developing countries, coming to a
store near you...

• Current developments, and a few predictions
• Chris Anstey, Product Integrity Manager,
• Tesco Stores Ltd

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Presentation summary

• Tesco faces a global challenge when managing
  supply chains, solutions are needed for all
  Operating Companies
• Brief reminder on Tesco process and policy, here
  and abroad
• Foundations of our approach to Standards,
  reminder of our own expectations, what is and
  isnt acceptable, and what it means
• How Third parties are allowed into our approach
• Case studies from Zimbabwe, Zambia, Kenya and
  Thailand
• GFSI agenda, our support and involvement in
  encouraging retailers around the world to accept
  a harmonised approach
• Tesco vision simple clear rules, competent Third
  parties, close management, improving standards,
  happy customers

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INTERNATIONAL

• 1 in UK, Ireland, Hungary, Poland, Czech
  Republic, Slovak Republic and Thailand
• Working towards being 1 in
  South Korea and Malaysia
• Just starting in Japan and Turkey

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INTERNATIONAL BUSINESS
No of Hypermarkets
International space as of group
193
152
49
45
42
37
102
30
68
38
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INTERNATIONAL PERFORMANCE
Underlying operating profit
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Some basics...

• Our supplier management policy is based on
  legislation, but is really there for Customers
• We know that our Customers expect a great deal
  from our brand
• They expect value, quality, safety, legality,
  environmental standards and ethics
• Broadly, our aim is to build and protect our
  brands wherever they are produced, and for
  whatever market

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What does this mean in Practice?

• Only approved Suppliers for Tesco brand
• Approval is measured against OUR standards
• There must be a specification
• Supplier and product performance will be
  monitored
• All relevant technical information will be
  documented

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Tesco position on farm assurance

• We know that good farm assurance improved food
  safety, product quality and reduced costs
• We know that not all suppliers are ready to start
  a programme of farm assurance
• We will advise them on how to proceed if they are
  ready.

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What does this mean for a developing country?

• The rules are no different, and standards cannot
  be compromised
• They must understand their strengths and their
  weaknesses
• To achieve sales in the high value retail sector
  they will have to be prepared to consistently
  achieve the required standards

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Zimbabwe case study

• Entrepreneurial farmers identified a niche market
  in luxury vegetables in the 80s
• They knew their strengths
• Labour costs
• Climate, land and water
• Season to compliment market leader (Kenya)
• Technical and agronomic skills
• Innovative range development

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Zimbabwe case study

• At its peak in the late 90s, tens of thousands
  of jobs had been created
• Twenty years later, there is almost nothing left
• Developing countries require political stability
  to secure and maintain their markets

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Zambia case study

• York Farm, Lusaka
• 2, 800 employees, and 12 month supply to UK
• Socially responsible for 14,000
• Gold standard Natures Choice
• Eurepgap certified
• BRC Food Standard evaluation during 2004
• 2 out growers are large commercial farms

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Kenya case study

• In 94 a scheme for small growers was set up
  growing beans and peas for Tesco
• A simple farm assurance standard was implemented
• Within 12 months the scheme was closed.
• To manage due diligence consistently proved
  difficult for local managers

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Thailand case study

• A new test identified a veterinary residue in
  prawns in 2000, and in poultry a year later.
• Our prawn sourcing is now spread across Sumatra,
  Madagascar, Honduras and Nicaragua, and our
  poultry sourcing now includes Brazil
• International regulations on prescribed
  veterinary drugs were not realised by an
  industry.
• No problems were ever found on any Tesco product.

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Summary of case studies

• All suppliers face the same challenges
• Technical Standards in factories
• Social Standards for workers
• Animal welfare and farm assurance standards
• Environmental risk management
• The informal challenges are just as difficult
• Language
• Culture

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Learnings

• Local compliance and enforcement standards must
  be consistent, and must consider international
  market requirements
• Schemes for fresh produce involving small growers
  will require substantial support
• Harmonisation of standards is a fundamental
  enabler of trade for all supply chains
• Retailers will only consider suppliers on their
  merits Value, quality, availablility.
• Legislative controls can overrule retailers and
  their supply chain management

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Global Food Safety Initiative

• Launched at the CIES Annual Congress May 2000
• A simple set of rules for standards, harmony
  between all countries, save money for suppliers

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Tesco vision

• The Tesco Group supply chain runs to consistent
  rules
• We will maintain a position on due diligence
  inline with our position in the UK market.
• A third party solution will only ever be a part
  of our position
• There will be a shared internet based solution
  for the administration of standards